Must an amusement park pay sales tax when it rents coin-operated amusement devices and when it buys amusement rides?

Plain-English summary

Darien Lake Fun Country, Inc., an amusement park, asked whether sales tax is due on (1) its rental of coin-operated amusement devices and (2) its purchase of amusement park rides.

The Department held both are taxable retail purchases — not tax-free purchases for resale.

• The resale idea, and why it fails here. Section § 1105(a) taxes retail sales of tangible personal property; a "retail sale" is any sale other than for resale (§ 1101(b)(4)(i)), and "sale" includes a rental or lease (§ 1101(b)(5)). A purchase is for resale only if what the buyer sells on is itself a taxable sale of tangible personal property.
• Coin-operated devices → taxable rental. Courts have held that payments for operating coin-operated amusement devices are not receipts from the sale of tangible personal property (Bathrick Enterprises, Inc. v. Murphy, 27 A.D.2d 215). So the park doesn't "resell" the devices — its lease of them is a purchase at retail, taxable under § 1105(a) on the total lease payments (here an amount equal to 50% of the park's gross receipts). The regulation the park cited, 20 NYCRR § 526.10(g), didn't apply because the park pays a "total rent" merely equal to 50% of receipts, not a "pay-over" of its receipts to the lessor.
• Rides → taxable purchase. Receipts from operating amusement park rides are taxed as admission charges under § 1105(f)(1) (20 NYCRR 527.10(b)(3)(iv); Outdoor Amusement Business Association v. State Tax Commission), not as sales of tangible personal property. So the park's purchase of the rides is not a purchase for resale; it's a taxable retail purchase.

What this means for you

Buying to resell is tax-free only if your onward sale is itself a taxable sale of goods. An amusement operator doesn't resell tangible personal property when customers play coin-op games or ride rides — those receipts are taxed on a different basis (or as admissions). So the equipment you rent or buy to provide them is taxed to you, as the end user.

Renting equipment is a "sale" and is taxable to the renter here. The park's device lease was fully taxable on the rent it paid — even though the rent was pegged to a share of receipts. How the rent is calculated doesn't change that it's a taxable rental.

Watch the difference between "rent equal to X%" and "pay over receipts." The park avoided the leased-department pay-over rule because it paid rent merely equal to 50% of receipts, not a hand-over of its own receipts to the lessor. That distinction can change which party accounts for tax.

Common questions

Q: We rent coin-operated games for our park. Do we pay tax on the rental?
A: Yes. Because operating coin-op devices isn't a taxable sale of goods (Bathrick), you aren't reselling them — your rental is a taxable retail purchase, taxed on the total rent you pay.

Q: Are the rides we buy exempt as a purchase for resale?
A: No. Ride receipts are taxed as admission charges under § 1105(f)(1), not as sales of tangible personal property, so buying the rides is a taxable retail purchase.

Q: Our rent is a percentage of gross receipts. Does that change the tax?
A: No. The rental is taxable regardless of whether the rent is a percentage or a fixed amount, and the leased-department pay-over rule (§ 526.10(g)) didn't apply because the park paid rent merely equal to a percentage, not a pay-over of receipts.

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on receipts from retail sales of tangible personal property
• Tax Law § 1101(b)(4)(i) — "retail sale" is a sale other than for resale
• Tax Law § 1101(b)(5) — "sale" includes rental or lease
• Tax Law § 1105(f)(1) — tax on admission charges

Authorities cited:

• Bathrick Enterprises, Inc. v. Murphy, 27 A.D.2d 215 — payments for operating coin-operated amusement devices are not receipts from the sale of tangible personal property
• Outdoor Amusement Business Association v. State Tax Commission (1982) (adopting the dissent in 84 A.D.2d 952); 20 NYCRR 527.10(b)(3)(iv) — ride receipts are admission charges

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_46s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-82(46)S
Sales Tax
December 22, 1982

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINON

PETITION NO. S811006B

On October 6, 1981 a Petition for Advisory Opinion was received from Darien Lake Fun
Country, Inc., 9993 Allegany Road, Corfu, New York.
The issues raised are whether sales tax is due on (l) the rental of coin-operated amusement
devices to be used in an amusement park setting, and (2) the purchase of amusement park rides.
Section 1105(a) of the Tax Law imposes a tax on the receipts from retail sales of tangible
personal property. The term "retail sale" is defined, in relevant part, in section 1101(b)(4)(i) of the
Tax Law, as a sale "of tangible personal property to any person for any purpose, other than . . . for
resale . . . ." The term "sale" is defined, in section 1101(b)(5) of the Tax Law, so as to include the
rental or leasing of property. It has been judicially determined that payments for the operation of
coin-operated amusement devices do not constitute receipts from the sale of tangible personal
property. Bathrick Enterprises, Inc. v. Murphy, 27 AD 2d 215. Accordingly, petitioner's leasing of
coin-operated amusement devices constitutes not a purchase for resale but a purchase at retail, the
receipts from which are subject to tax under section 1105(a) of the Tax Law. The taxable receipts
in this instance are the total payments made under the applicable equipment lease agreement. Such
rental payments are stated in such agreement to be an amount equal to "fifty per cent (50%) of the
gross receipts collected by Lessee." The provision of the Sales and Use Tax Regulations cited by
Petitioner, 20 NYCRR §526.10(g), is not applicable here in that Petitioner is not required to "pay
over its receipts" to the Lessor, as it is put in the regulatory provision, but, rather, in the terms of the
lease, to pay a "total rent" which is merely "equal to" fifty per cent of the receipts.
Receipts from the operation of amusement park rides are subject to the tax on admissions
imposed under section 1105(f)(1) of the Tax Law. 20 NYCRR 527.10(b)(3)(iv); Outdoor
Amusement Business Association v. State Tax Commission, ____ N.Y. 2d. __ (1982) (adopting the
dissent in 84 AD 2d 952). Such receipts are therefore riot taxable under section 1105(a) of the Tax
Law, which imposes the tax on receipts from the retail sale of tangible personal property.
Accordingly, the purchase of such rides by Petitioner constitutes not a purchase for resale but a
purchase at retail, the receipts from which are subject to tax under section 1105(a) of the Tax Law.

DATED: December 2; 1982

s/Frank J. Puccia
Director
Technical Services Bureau

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)